Arancio v. Prudential Insurance Co. of America

247 F. Supp. 2d 333, 28 Employee Benefits Cas. (BNA) 2330, 2002 U.S. Dist. LEXIS 14461, 2002 WL 1808191
CourtDistrict Court, S.D. New York
DecidedAugust 7, 2002
Docket01 Civ. 12737(GEL)
StatusPublished
Cited by11 cases

This text of 247 F. Supp. 2d 333 (Arancio v. Prudential Insurance Co. of America) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arancio v. Prudential Insurance Co. of America, 247 F. Supp. 2d 333, 28 Employee Benefits Cas. (BNA) 2330, 2002 U.S. Dist. LEXIS 14461, 2002 WL 1808191 (S.D.N.Y. 2002).

Opinion

OPINION AND ORDER

LYNCH, District Judge.

Plaintiff Joseph Arancio brought this action in New York County Supreme Court on November 28, 2001, seeking disability benefits under a contract of insurance issued by defendants Prudential Insurance Company of America and Prudential Long Term Disability Conversion Insurance Trust (collectively “Prudential”). On December 28, 2001, Prudential removed the case to this Court, asserting that the underlying claims are governed by federal law, specifically, the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq. On March 8, 2002, plaintiff filed a Demand for Trial by Jury. About a month later, on April 12, 2002, Prudential moved to strike the jury trial demand arguing both that it was untimely and that ERISA plaintiffs are not entitled to jury trials. On the same day, plaintiff cross-moved for remand to state court, arguing that his claims are not governed by ERISA and that federal question jurisdiction is lacking. For the reasons stated below, plaintiff’s motion is granted, defendants’ motion is denied as moot, and the case is remanded to New York County Supreme Court.

BACKGROUND

From October 1993 until October 1999, Arancio was employed by Riverbay Corporation (“Riverbay”). Prior to leaving Riv-erbay, he participated in an employer-sponsored group disability plan offered by Prudential. Under that plan, employees had the option of converting to individual conversion policies with Prudential after their employment with Riverbay ceased. On October 29, 1999, Arancio’s employment with Riverbay ended (Pl.Aff.1I 7), and the following day, he converted his group disability plan to an individual policy (the “Conversion Policy”) (id. ¶ 8). On January 18, 2000, Arancio filed a disability claim with Prudential. (Id. ¶ 10.) Prudential denied plaintiffs initial claim and his subsequent administrative appeal. (Id. ¶¶ 10-11.) In this action, Arancio continues to seek those benefits.

DISCUSSION

A. Federal Question Jurisdiction

The essential issue before the Court is whether the Conversion Policy is governed by ERISA, and accordingly, whether this case properly presents a federal question.

ERISA governs “any employee benefit plan if it is established or maintained ... by any employer.” 29 U.S.C. § 1003 (1999). An employee welfare benefit plan is defined as “any plan, fund, or program ... established or maintained by an employer.” 29 U.S.C. § 1002(1) (1999). There is no dispute that the group disability plan in which Arancio participated during his employment at Riverbay was such a plan, and that claims under it would have been subject to federal jurisdiction. See 29 U.S.C. § 1144(a) (1999). There is also no dispute that Arancio’s right under that plan to convert to an individual policy was also governed by ERISA. The Second Circuit has held that the notice process relating to such conversion rights cannot be regulated by state law, since such laws would regulate the actual content of an employee benefit plan. Howard v. Gleason Corp., 901 F.2d 1154, 1158 (2d Cir.1990). ERISA aims to relieve employers of the administrative burden of complying with conflicting state and local regulations. See, e.g., Fort Halifax Packing Co., Inc., v. Coyne, 482 U.S. 1, 9-11, 107 S.Ct. 2211, 96 *336 L.Ed.2d 1 (1987) (discussing the purpose of ERISA preemption). Thus, plans administered by employers, including those aspects of employee benefits that permit conversion, are governed by uniform federal law, and state laws regulating the right to convert are preempted.

The situation presented here is quite different. The parties do not dispute that Arando had and exercised a right to convert, nor do they dispute that he now has a policy with the defendants. Now that Ar-ando has exercised his conversion right, the policy he holds is the same as any other individual policy. The Conversion Policy names Prudential, not the employer, as the administrator of claims. (PI. AffA 9.) Riverbay no longer finances the policy as it did under the group insurance plan. Instead, Arando pays the premiums. (PI. Aff. Ex. 2 at 7-8.) Since the filing of plaintiffs disability claim, all communication regarding the claim has been between Arando and Prudential, and not between Arando and his former employer. (Pl.AffA 14.) In effect, the whole point of the conversion right is precisely to permit the employer to convert from participation in the employer’s group plan to an individual insurance policy.

Arando now has an independent relationship with Prudential, formed when he converted from his previous employer-sponsored plan. Such a relationship is not governed by ERISA. Accordingly, the controversy does not support federal question jurisdiction.

B. Diversity Jurisdiction

In their notice of removal, defendants asserted only federal question jurisdiction. However, in their briefs submitted on the current motions, Prudential claims that this action is properly before the Court on diversity grounds as well. (Def. Mem. at 19.) At the Court’s request, the parties submitted additional briefing on July 23, 2002, to address whether or not this Court should exercise diversity jurisdiction. Neither party appears to dispute that the parties are citizens of different states, although plaintiff skirts the issue in his letter brief. (Defs. Letter Brief at 3; PI. Letter Brief at 2.) For purposes of this order, the Court will assume that diversity exists.

The parties approach the diversity question from different angles, each seeking to profit from the other’s alleged procedural defaults. Plaintiff would have us consider whether the defendants can amend their petition for removal and add an entirely new ground once the statutory time for filing a removal petition has lapsed. (PI. Letter Brief at 2.) Defendants, although they initially ask the same question (Defs. Letter Brief at 2), reframe the issue as whether the plaintiff can move to remand for defective removal after the statutory time for such a motion has expired (id. at 2-4).

Plaintiffs procedural lapse, if lapse it was, is more easily overlooked. It is true that a plaintiff ordinarily may not raise a non-jurisdietional removal defect after 30 days. 28 U.S.C. § 1447(c) (1999). But this familiar rule is inapplicable here for several reasons. First, plaintiff is not seeking a remand because of any technical defect in the removal notice.

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247 F. Supp. 2d 333, 28 Employee Benefits Cas. (BNA) 2330, 2002 U.S. Dist. LEXIS 14461, 2002 WL 1808191, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arancio-v-prudential-insurance-co-of-america-nysd-2002.